Sales and Use Tax Annotations

Annotation 330.4070

(d) "SUBSTANTIAL CHANGE IN FORM"

330.4070Rentals Made by a Separate Division or by a Subsidiary. A corporation manufactures company uniforms that it wishes to lease in California. If it does so through a separate division, rental receipts will be taxable because the uniforms will not be leased in the form in which they were acquired. The separate division is considered the same person as the manufacturing division. If the corporation sells the uniforms to a subsidiary corporation in an arms length transaction, the subsidiary, being a separate person, will have the option of paying tax on cost or on rental receipts. 2/15/95.